MasterCard is open to reviewing interchange fees for low-value transactions as it fights rivals such as a reinvigorated eftpos for a share in the cash transactions market.

The Reserve Bank, which has previously threatened to regulate interchange fees and voiced concerns around excessive merchant surcharges, would welcome any such move from MasterCard.

MasterCard’s divisional president for Australasia,
Eddie Grobler
, told The Australian Financial Review that interchange fees were rarely passed on to consumers for low value transactions but that MasterCard was sensitive to “market dynamics".

Eftpos announced its timetable for contactless, mobile and online transactions on Friday in a bid to be competitive with international schemes such as MasterCard and Visa.

From this month, there is a zero interchange fee for eftpos transactions below $15 while for MasterCard debit transactions a merchant’s bank pays the cardholder’s bank around 12¢.

“We need to be open-minded on market forces and how they play out," Mr Grobler said, in response to whether MasterCard would consider changing its surcharges.

“It is obviously a scenario we need to look at.

“Our challenge is to remain pro-active although sometimes it is necessary to be reactive."

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Mr Grobler noted that MasterCard had just a 2 per cent share of the $100 billion of cash transactions below $20 in 2008, and was keen to take a larger slice.

Both eftpos and MasterCard have acknowledged the greater opportunity in having a larger share of the cash market and building online and contactless capability, rather than fretting about the slowing growth of credit.

The share of all purchases by value on debit has grown by 2.5 per cent in the past decade to 39.5 per cent in August while the share of credit and charge cards fell by the same amount to 60.5 per cent of value.

Mr Grobler described MasterCard as a late entrant to the scheme debit scene in 2006 and said growth of market share would come as it lifted its number of issuers.

Scheme debit is the use of a MasterCard or Visa card to access a holder’s savings, as opposed to a line of credit.

He also said the scheme was targeting specific segments.

“Gen Y [those born during the 1980s and early 90s] are early adopters and of the 7 million [contactless] cards we have on issue, half are debit," he said.

“We host concerts where people can only pay with a Visa debit and have had strong take up, Gen Y are sticky customers."

Mr Grobler said contactless payments, where credit or debit cards are waved past a terminal without the need for a PIN or signature for transactions below $100, had gained momentum since late last year, and further growth would come as more terminals accepted this.

MasterCard has mandated that merchants in several sectors – supermarkets, taxis and petrol stations – will need to have at least one contactless terminal by April, 2014.

Mobile and digital payments are viewed as the next big growth area.

Mr Grobler said there would be an easy transition to mobile payments from contactless cards, as terminals were enabled with compatible technology.

Separately, Mr Grobler said MasterCard had three key priorities; its core business of credit, debit and commercial prepaid cards; diversifying its business into different countries and consumer groups such as mobile network operators; and increasing innovation around ecommerce and mobile payments through its research.

MasterCard is said to be ahead of Visa in issuing contactless cards, but lags its rival in scheme debit card issuance.

The scheme recorded more than a million contactless transactions for the first time in August, with the bulk of local financial institutions issuing its PayPass card.

Some market participants have suggested that the bilateral network of eftpos – where there are individual links between issuing and acquiring banks – would make it harder for it to move to contactless technology.

But Eftpos Payments Australia managing director
Bruce Mansfield
dismissed this and said the network structure presented no barrier to the fast take-up of contactless eftpos cards.